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5. K EY ASSETS AVAILABLE
TO SUPPORT OUTPUT DELIVERY
Introduction
The Department controls infrastructure and
other investments that are utilised in fulfilling
its objectives and conducting its activities. They
represent the resources that have been entrusted
to the Department for delivery of those outputs.
Structure
5.1 Property, plant and equipment
5.1.1 Depreciation and impairment
5.1.2 Reconciliation of movements
in carrying amount
5.1.3 Carrying amount by purpose groups
5.2 Intangible assets
5.3 Joint operations
102 DEDJTR Annual Report 2017-18
5.1 Property, plant and equipment
PROPERTY, PLANT AND EQUIPMENT CARRYING AMOUNT
($ thousand)
Gross carrying amount Accumulated Net carrying amount
Depreciation
2018 2017 2018 2017 2018 2017
Land at fair value 986,837 774,727 - - 986,837 774,727
Buildings and structures at fair value
Building leasehold 541,176 539,799 (76,527) (54,847) 464,649 484,952
Leasehold Improvements
Plant and equipment at fair value 31,521 23,476 (15,071) (8,334) 16,450 15,142
Assets under construction at cost
Infrastructure at fair vale 53,903 68,774 (33,978) (36,704) 19,925 32,070
Cultural assets at fair value
Net carrying amount 126,774 135,381 (79,979) (91,566) 46,795 43,815
846,022 364,687 - - 846,022 364,687
52,719 54,564 (1,570) (4,423) 51,148 50,141
19,641 19,640 (1,287) (6) 18,353 19,634
2,658,591 1,981,048 (208,413) (195,880) 2,450,178 1,785,168
Initial recognition The initial cost for non-financial physical assets
under a finance lease is measured at amounts equal
Items of property, plant and equipment, are to the fair value of the leased asset or, if lower, the
measured initially at cost and subsequently present value of the minimum lease payments, each
revalued at fair value less accumulated depreciation determined at the inception of the lease. Also noted
and impairment. Where an asset is acquired for that certain assets are acquired under finance
no or nominal cost, the cost is its fair value at leases, which may form part of a service concession
the date of acquisition. Assets transferred as arrangement (public private partnership).
part of a machinery of government change are
transferred at their carrying amount. Subsequent measurement
The cost of constructed non-financial physical Property, plant and equipment (PPE) are
assets includes the cost of all materials used in subsequently measured at fair value less
construction, direct labour on the project, and accumulated depreciation and impairment.
costs directly attributable to bringing the asset Fair value is determined with regard to the
into operation as intended. asset’s highest and best use (considering legal or
physical restrictions imposed on the asset, public
The costs of leasehold improvements are capitalised announcements or commitments made in relation
as assets and depreciated over the shorter of the to the intended use of the asset) and is summarised
remaining term of the leases or the estimated useful below by asset category.
life of the improvements.
Non-specialised land and non-specialised buildings
are valued using the market approach, whereby
assets are compared to recent comparable sales
or sales of comparable assets that are considered
to have nominal value.
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Specialised land and specialised buildings: The 5.1.1 Depreciation and impairment
market approach is also used for specialised land,
although is adjusted for the community service All infrastructure assets, buildings, plant and
obligation (CSO) to reflect the specialised nature equipment and other non-financial physical
of the land being valued. assets that have finite useful lives are depreciated.
The exceptions to this rule include items under
The CSO adjustment is a reflection of the valuer’s operating leases, assets held for sale and land.
assessment of the impact of restrictions associated
with an asset to the extent that is also equally DEPRECIATION BY ASSET CLASS
applicable to market participants.
($ thousand)
For the majority of the Department’s specialised
buildings, the current replacement cost method 2018 2017
is used, adjusting for the associated depreciation.
Buildings and structures 22,833 22,639
Infrastructure including road infrastructure
and earthworks are valued using the current Building leasehold 6 71
replacement cost method. This cost generally
represents the replacement cost of the building/ Leasehold improvements 6,691 7,206
component after applying depreciation rates on
a useful life basis. However, for some assets, the Plant and equipment 5,250 8,031
cost may be the reproduction cost rather than the
replacement cost if those assets’ service potential Leased plant and equipment 3,967 4,789
could only be replaced by reproducing them with
the same materials. Infrastructure 1,299 552
Vehicles are valued using the current replacement Cultural assets 1,281 797
cost method. The Department acquires new vehicles
and at times disposes of them before the end Total depreciation (i) 41,327 44,085
of their economic life. The process of acquisition,
use and disposal in the market is managed by (i) Excludes amortisation of $1.8 million (2017: $2.2 million) relating
experienced fleet managers in the Department who to intangible produced assets disclosed in Note 5.2 - Intangible
set relevant depreciation rates during use to reflect assets.
the utilisation of the vehicles.
Fair value for plant and equipment that are
specialised in use (such that it is rarely sold other
than as part of a going concern) is determined using
the current replacement cost method.
Refer to Note 8.3 Fair value determination, for
additional information on fair value determination
of property, plant and equipment.
104 DEDJTR Annual Report 2017-18
Depreciation is generally calculated on a straight- Impairment
line basis, at rates that allocate the asset's value,
less any estimated residual value, over its estimated Non-financial assets, including items of property,
useful life. Typical estimated useful lives for the plant and equipment, are tested for impairment
different asset classes for current and prior years whenever there is an indication that the asset may
are included in the table below: be impaired.
USEFUL LIFE BY ASSET CLASS The assets concerned are tested as to whether
their carrying value exceeds their recoverable
years 2017 amount. Where an asset’s carrying value exceeds
2018 its recoverable amount, the difference is written
off as an other economic flow, except to the extent
Building leasehold 1 to 33 7 to 33 that the write down can be debited to an asset
revaluation surplus amount applicable to that class
Infrastructure 20 to 50 20 to 50 of asset.
Cultural assets 100 100 If there is indication that there has been a reversal
in the estimate of an asset's recoverable amount
Leasehold improvements 1 to 20 4 to 19 since the last impairment loss was recognised,
the carrying amount shall be increased to its
Plant and equipment 1 to 50 1 to 50 recoverable amount. This impairment loss is
reversed only to the extent that the asset's carrying
Leased plant and equipment 1 to 3 1 to 3 amount does not exceed the carrying amount that
would have been determined, net of depreciation
Intangible produced assets - 4 to 7 4 to 7 or amortisation, if no impairment loss had been
software development recognised in prior years.
The estimated useful lives, residual values and The recoverable amount for most assets is
depreciation methods are reviewed at the end measured at the higher of Current replacement
of each annual reporting period and adjustments cost method and fair value less costs to sell.
made where appropriate. Recoverable amount for assets held primarily to
generate net cash inflows is measured at the higher
Leasehold improvements are depreciated over of the present value of future cash flows expected
the shorter of the lease term and their useful lives. to be obtained from the asset and fair value less
costs to sell.
In the event of the loss or destruction of an asset,
the future economic benefits arising from the use
of the asset will be replaced (unless a specific
decision to the contrary has been made).
Indefinite life assets: Land, land under
declared roads, and core cultural assets, which
are considered to have an indefinite life, are
not depreciated. Depreciation is not recognised
in respect of these assets because their service
potential has not, in any material sense, been
consumed during the reporting period.
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5.1.2 R econciliation of movements in carrying amount
($thousand)
Land at fair value Buildings and structures
at fair value
2018 2017 2018 2017
Opening balance 774,727 714,194 484,952 545,002
Additions
Disposals 68,135 33,213 - 316
Net revaluation increments/(decrements)
Transfers via contributed capital - (14,281) (10,281) (76)
Transfers to classified as held for sale
Net transfers (to)/from government entities 101,376 145,942 2,176 21,331
Depreciation and amortisation expense
Received/(given) free of charge 36,013 - - -
Transfers between classes
Recognition/(derecognition) - (108,492) - (70,666)
Closing balance
6,586 - 2,760 (3,862)
- - (22,833) (22,638)
- (10) - -
- 4,161 7,876 15,545
----
986,837 774,727 464,650 484,952
($thousand)
Leased plant and equipment Assets under construction
2018 2017 2018 2017
Opening balance 15,576 16,047 364,688 115,298
Additions
Disposals 6,610 6,933 4,234,383 2,719,694
Net revaluation increments/(decrements)
Transfers via contributed capital (1,915) (2,517) - (0)
Transfers to classified as held for sale
Net transfers (to)/from government entities ----
Depreciation and amortisation expense
Received/(given) free of charge - 8 (3,709,833) (2,433,694)
Transfers between classes
Recognition/(derecognition) (305) (214) - -
Transfers to Prepaid Lease
Closing balance (1,816) - - -
(3,967) (4,789) - -
41 - - -
(191) 109 (4,349) (21,015)
- - - (15,595)
- - (38,868) -
14,032 15,576 846,020 364,688
106 DEDJTR Annual Report 2017-18
($thousand)
Buildings leasehold Leasehold improvements Plant and equipment
2018 2017 2018 2017 2018 2017
15,142 16,053 32,069 28,268 28,237 26,105
2,558 7 30 5,803 14,093 11,117
(830) - - - (998) (806)
- (257) - - --
---- --
---- --
- - (800) - (2,720) -
(5,423) (71) (1,274) (7,206) (5,250) (8,031)
---- - (143)
4,056 (590) (5,654) 5,204 (601) (6)
- - (3,500) - --
15,503 15,142 20,871 32,069 32,761 28,237
Infrastructure 2017 ($thousand) 2017 Total 2017
2018 Cultural assets 2018
2018
50,141 55,309 19,634 9,619 1,785,166 1,525,895
- 77 -- 4,325,809 2,777,159
-- -- (14,025) (17,681)
2,307 - - 9,950 105,859 176,965
-- -- (3,673,820) (2,433,686)
-- -- (305) (179,372)
-- -- 4,010 (3,862)
(1,299) (552) (1,281) (797) (41,327) (44,084)
-- -- 41 (153)
- (4,692) - 862 1,136 (422)
-- -- (3,500) (15,595)
-- -- (38,868) -
51,148 50,141 18,353 19,634 2,450,178 1,785,168
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FINANCIAL PERFORMANCE
5.1.3 C arrying amount by purpose groups
CARRYING AMOUNT BY PURPOSE GROUPS ($ thousand)
Land at fair value Public administration Transportation and
Buildings and structures at fair value communications
Building leasehold
Leasehold Improvements 2018 2017 2018 2017
Plant and equipment at fair value
Assets under construction at cost 156,830 108,073 248,437 119,974
Infrastructure at fair vale
Cultural assets at fair value 13,668 2,408 - -
Net carrying amount
- 11,896 16,450 -
19,006 10,309 - 16,089
3,767 1,286 4,804 1,796
286,487 99,937 546,070 254,486
26,874 25,595 24,275 24,546
- - 256 256
506,632 259,504 840,292 417,147
108 DEDJTR Annual Report 2017-18
($ thousand)
Public safety and environment Total
2018
2018 2017 986,837 2017
464,649 774,727
581,570 546,680 16,450 484,952
19,925
450,980 482,543 46,795 15,142
846,022 32,070
- 3,246 51,148 43,813
18,353 364,689
919 5,672 2,450,178 50,141
19,634
38,224 40,729 1,785,168
13,465 10,265
--
18,097 19,378
1,103,254 1,108,513
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5.2 Intangible assets Computer software ($ thousand)
2018
Gross carrying amount 2017
Opening balance 26,115
Additions 1,678 24,526
Net revaluation increments/(decrements) (115) 1,393
Machinery-of-government transfers (i) -
Transfers between classes - -
Transfer to Prepaid Lease (2,583) -
Tourism Victoria composite reporting -
Closing balance 810 196
- 26,115
25,906
Accumulated amortisation (21,094) (18,919)
Opening balance (1,753) (1,990)
Amortisation 1,912
Transfers between classes - (103)
Tourism Victoria composite reporting (82)
Closing balance (20,935) (21,094)
Net carrying amount at end of financial year 4,971 5,021
(i) Other intangible assets were deferred expenditure for the development of Parkville Gardens by Major Projects Victoria.
Effective 1 April 2017, Places Victoria and Major Projects Victoria merged to form Development Victoria.
Other intangible assets An internally generated intangible asset arising from
development (or from the development phase of an
Other intangibles represents the difference internal project) is recognised if, and only if, all of the
between the States payment to La Trobe University following are demonstrated:
for a 25 year lease term for the BioScience Research
Centre and the market value of that rental. (a) the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
Initial recognition
(b) an intention to complete the intangible asset
Purchased intangible assets are initially and use or sell it;
recognised at cost. When the recognition criteria
in AASB 138 Intangible Assets is met, internally (c) the ability to use or sell the intangible asset;
generated intangible assets are recognised
at cost. Subsequently, intangible assets with finite (d) the intangible asset will most likely generate
useful lives are carried at cost less accumulated future economic benefits;
amortisation and accumulated impairment losses.
Amortisation begins when the asset is available (e) the availability of adequate technical, financial
for use, that is, when it is in the location and and other resources to complete the development
condition necessary for it to be capable of operating and to use or sell the intangible asset; and
in the manner intended by management.
(f) the ability to measure reliably the expenditure
attributable to the intangible asset during
its development.
110 DEDJTR Annual Report 2017-18
Other 2017 Total ($ thousand)
2018 2018
50,227 2017
32,925 - 59,040
- - 1,678 74,753
- (115) 1,393
- (17,302) - -
- -
- - (2,583) (17,302)
- - 810 -
- -
32,925 32,925
58,831 196
59,040
(512) (409) (21,606) (19,328)
(103) (103) (1,856) (2,093)
1,912
- - - (103)
- - (82)
(614) (512) (21,550) (21,606)
32,310 32,413 37,281 37,435
Subsequent measurement Impairment
Intangible produced and non-produced assets Intangible assets with indefinite useful lives
with finite useful lives are amortised on a (and intangible assets not yet available for use)
straight-line basis over their useful lives of 4 to are tested annually for impairment (as described
7 years. Intangible produced assets with finite below) and whenever there is an indication that
useful lives are amortised as an expense from the asset may be impaired. Intangible assets
transactions and intangible non-produced assets with finite useful lives are tested for impairment
with finite useful lives are amortised as an 'other whenever an indication of impairment is identified.
economic flow'.
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5.3 Joint operations
A joint operation is a joint arrangement
whereby the parties that have joint control
of the arrangement have rights to the assets,
and obligations for the liabilities, relating to
the arrangement. This is appose to a joint venture,
also a joint arrangement, whereby the parties that
have joint control of the arrangement have rights
to the net assets of the arrangement.
Joint arrangements have two or more parties with
joint control and are characterised by the following:
• the parties are bound by a contractual
arrangement, and
• the contractual arrangement gives two or more
of those parties joint control of the arrangement.
For joint operations, DEDJTR recognises in the
financial statements: its assets, including its share
of any assets held jointly; its liabilities, including
its share of any liabilities that it had incurred;
its revenue from the sale of its share of the output
from the joint operation and its expenses, including
its share of any expenses incurred jointly.
ADDITIONAL INFORMATION ON JOINT OPERATIONS
Ownership interest
Name of entity Principal activity Country of 2018 2017
incorporation % %
Royal Melbourne To host a variety of events for the
Showgrounds public at the Showgrounds Australia 50.0 50.0
Biosciences To continue to provide Australia 75.0 75.0
Research Centre a world-class research facility
112 DEDJTR Annual Report 2017-18
Royal Melbourne Showgrounds Biosciences Research Centre
The State entered into a joint operation with In April 2008, the State entered into a joint operation
the Royal Agricultural Society of Victoria Limited agreement with La Trobe University (La Trobe)
(RASV) in October 2003 to redevelop the Royal to establish a world class research facility on the
Melbourne Showgrounds. University's campus in Bundoora, AgriBio, Centre
for AgriBioscience.
Two joint operations structures were established,
an unincorporated joint operation to carry out A similar structure to the Showgrounds Joint
and deliver the joint operations project, and an operation has been adopted comprising an
incorporated joint operation entity, Showgrounds unincorporated joint operation to carry out
Nominees Pty Ltd, to hold the assets of the joint and deliver the joint operation project, and an
operation and to enter into agreements on behalf incorporated joint operation entity, Biosciences
of the State and RASV. Research Centre Pty Ltd to hold the assets of
the joint operation and to enter into agreements
The State’s contribution to the joint operation is on behalf of the State and La Trobe. The State’s
$100.7 million (expressed in 2004 dollars) while contribution to the joint operations is $227.3 million
RASV has contributed its freehold title to the (expressed in May 2009 dollars).
showgrounds land valued at $51 million in June
2005. In June 2006, Showgrounds Nominees Pty On 30 April 2009, Biosciences Research Centre Pty
Ltd entered into a Development and Operations Ltd entered into a project agreement (on behalf
Agreement (on behalf of the State and RASV) with of the State and La Trobe) with Plenary Research
the concessionaire, PPP Solutions (Showgrounds) Pty Ltd (the Concessionaire) to design, construct,
Nominee Pty Ltd, to design, construct, finance finance and maintain the facility over the project’s
and maintain the new facilities at the showgrounds. operating term. The project’s operating term
is 25 years from the date of commercial acceptance
The project operation term is 25 years from the which occurred 18 July 2012. The joint operation
date of commercial acceptance of completed works project is being delivered under the Partnerships
which occurred in August 2006. The joint operation Victoria Policy framework. In accordance with the
project is being delivered under the Partnerships joint operation agreement, the participants are
Victoria Policy framework. required to fund the administration expenses of the
joint operation in equal shares of 50 per cent each.
In addition, La Trobe contributes on a quarterly
basis, 25 per cent of the general facilities
management, maintenance and minor work costs
associated with the services.
The Department pays quarterly service payments in
full each quarter as they fall due. In December 2015,
La Trobe exercised the right to pay its remaining
service payments in full.
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FINANCIAL PERFORMANCE
The Department’s interest in assets, liabilities, Contingent liabilities and commitments arising
income, and expenses in the above joint from the Department’s interests in joint operations
operations is detailed below. The amounts are disclosed in Note 7.5 - Commitments for
are included in the financial statements under expenditure and Note 8.2 - Contingent assets and
their respective categories. contingent liabilities.
SUMMARISED FINANCIAL INFORMATION
AgriBio Project ($ thousand) Royal Melbourne 2017
Current assets 2018 2017 Showgrounds
Cash and deposits
Receivables – contributions receivable 2018
Receivables – accrued income
Total current assets - - 237 326
Non-current assets - - 6,165 6,469
Receivables – contributions receivable 6,140 5,947
Property, plant and equipment 6,140 5,947 184 180
Intangible assets 6,586 6,975
Total non-current assets
Total assets - - 5,116 9,776
Current liabilities 119,924 126,534 106,563 127,392
Payables 32,312
Borrowings 152,236 32,415 - -
Other liabilities 158,376 158,949 111,678 137,168
Total current liabilities 164,896 118,264 144,143
Non-current liabilities
Borrowings 6,140 5,947 1,716 1,718
Other liabilities 2,776 996 1,637 1,484
Total non-current liabilities -
Total liabilities - 55 55
Net assets 8,916 6,943 3,408 3,257
247,548 257,052 40,126 41,763
- - 2,202 2,257
42,328
247,548 257,052 45,736 44,020
256,464 263,995 72,528 47,277
(98,088) (99,099) 96,866
Income 26,330 30,064 1,620 1,947
Expenses 31,456 30,289 6,443 6,686
114 DEDJTR Annual Report 2017-18
6. OTHER ASSETS AND LIABILITIES
Introduction
This section sets out those assets and liabilities that arose from the Department's operations.
Structure
6.1 Receivables
6.2 Payables
6.3 Other non-financial assets
6.4 Other provisions
6.1 Receivables (continued)
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FINANCIAL PERFORMANCE
6.1 Receivables
Receivables includes amounts owing from government through appropriation receivable, short and long term
credit and accounts receivable, accrued investment income, grants, taxes and interest receivable.
CURRENT RECEIVABLES ($ thousand) 2017
2018
Contractual
Receivables - government 55,963 42,157
Receivables - non-government (ii) 25,613 13,569
81,576 55,726
Statutory
Amounts owing from Victorian Government (i) 1,065,377 934,985
GST input tax credit recoverable from the ATO 132,529 63,347
1,197,906 998,332
Total current receivables 1,279,482 1,054,058
NON-CURRENT RECEIVABLES ($ thousand) 2017
Contractual 2018
Receivables - Government 17,423
Receivables - non-government (ii) 7,302 211,950
241,013 229,373
Statutory 248,315
Amounts owing from Victorian Government(i) 14,314
18,976 14,314
Total non-current receivables 18,976 243,687
267,291
Total receivables 1,546,773 1,297,745
(i) The amounts recognised from the Victorian Government represent funding for all commitments incurred through the appropriations
and are drawn from the Consolidated Fund as the commitments fall due.
(ii) Includes $246 million of rural assistance schemes and is guaranteed by the Commonwealth. Effective from 30 June 2016, the Rural
Assistance Commissioner replaced the former Rural Finance Corporation Victoria. Through an agreement with the Government, rural
assistance schemes such as grants and loans are delivered by Bendigo and Adelaide Bank under the name Rural Finance. Rural Finance
delivers rural assistance schemes, such as drought and dairy concessional loans, on behalf of the Government. See Note 7.1 - Borrowings
for advances from Commonwealth relating to the Federal Government's concessional loan scheme with the Department of Agriculture and
Water Resources.
116 DEDJTR Annual Report 2017-18
Contractual receivables are classified as financial instruments and categorised as loans and receivables.
They are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial
measurement, loans and receivables are measured at amortised cost using the weighted average interest
method.
Statutory receivables do not arise from contracts and are recognised and measured similarly to contractual
receivables (except for impairment), but are not classified as financial instruments. Amounts recognised
from the Victorian Government represent funding for all commitments incurred and are drawn from the
Consolidated Fund as the commitments fall due.
AGEING ANALYSIS OF CONTRACTUAL RECEIVABLES
($ thousand)
Past due but not impaired
Carrying Not past Less than 1–3 3–12 1–5
amount due and not 1 month months months years
impaired
2018
Receivables (i) 329,891 315,066 5,639 1,521 2,718 4,947
Total 329,891 315,066 5,639 1,521 2,718 4,947
2017
Receivables (i) 285,099 273,679 1,338 762 4,756 4,564
Total 285,099 273,679 1,338 762 4,756 4,564
(i) The carrying amounts disclosed here exclude statutory receivables (e.g. amounts owing from Victorian Government and GST input tax
credit recoverable).
The receivables include a provision for doubtful debts of $0.2 million (2017: $0.2 million).
Receivables are assessed for bad and doubtful debts on a regular basis. A provision for doubtful receivables
is recognised when there is objective evidence that the debts may not be collected and bad debts are
written off when identified. In assessing impairment of statutory (non-contractual) financial assets which
are not financial instruments, professional judgement is applied in assessing materiality and using estimates,
averages and computational shortcuts in accordance with AASB 136 Impairment of Assets.
No interest is charged on receivables. Average credit period for sale of goods/services and for other
receivables is 30 days. A provision is made for estimated irrecoverable amounts from the sale of goods when
there is objective evidence that an individual receivable is impaired. The increase in the provision for the year
is recognised in the net result.
Loans to third parties are repayable on demand. However, payment is not expected within 12 months after
the reporting period and these balances are consequently classified as non-current.
Bad debts are considered as written off unilaterally are classified as a transaction expense. Bad debts
not written off by mutual consent but included in the provision for doubtful receivables, are classified as other
economic flows in the net result.
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6.2 Payables
Payables includes short and long-term trade debt and accounts payable, grants, taxes and interest payable.
CURRENT PAYABLES ($ thousand) 2017
2018
Contractual
Amounts payable to other government agencies 1,110,104 1,323,713
Other payables 611,155 379,518
1,721,259 1,703,231
Statutory
Other payables 2,479 2,495
Total current payables 1,723,738 1,705,726
Non-current payables 88,210 12,252
Contractual 88,210 12,252
Other payables 1,811,948 1,717,978
Total non-current payables
Total payables
Contractual payables, classified as financial instruments and measured at amortised cost. Accounts payable
represents liabilities for goods and services provided to the department prior to the end of the financial year
that are unpaid.
Statutory payables are recognised and measured similarly to contractual payables, but are not classified
as financial instruments and not included in the category of financial liabilities at amortised cost, because
they do not arise from a contract.
118 DEDJTR Annual Report 2017-18
MATURITY ANALYSIS OF CONTRACTUAL PAYABLES (I)
($ thousand)
Maturity dates
Carrying Nominal Less than 1 1 - 3 Months 3 - 12 Months 1-5
amount amount Month years
2018 88,210
88,210
Payables 1,809,469 1,809,405 1,686,172 29,386 5,637
9,905
Total 1,809,469 1,809,405 1,686,172 29,386 5,637 9,905
2017
Payables 1,715,483 1,715,483 1,696,341 1 9,235
Total 1,715,483 1,715,483 1,696,341 1 9,235
(i) Maturity analysis is presented using the contractual and discounted cash flow.
Payables for supplies and services have an average credit period is 30 days. No interest is charged on late
payments for "other payables".
DEDJTR Annual Report 2017-18 119
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FINANCIAL PERFORMANCE
6.3 Other non-financial assets ($ thousand) 2017
2018
Current other non-financial assets 12,873
Prepayments 19,665 272
Inventories 170
Total current other non-financial assets 13,145
19,835
Non-Current other non-financial assets 186,661 -
Prepayments 186,661 -
Total current other non-financial assets
Other non-financial assets include prepayments which represent payments in advance of receipt of goods
or services or that part of expenditure made in one accounting period covering a term extending beyond
that period.
Inventories refer to consumables and farm produce of consumable stores relating to the agriculture division.
120 DEDJTR Annual Report 2017-18
6.4 Other provisions ($ thousand) 2017
2018 107,088
OTHER PROVISIONS
19,817 383
Acquisition of land and buildings 342 107,471
Other
Total other provisions 20,159
RECONCILIATION OF MOVEMENT - ACQUISITION OF LAND AND BUILDINGS ($ thousand) 2017
2018
Current 31,588
Opening balance 107,088 79,761
Acquisition of land and buildings 9,037 (4,261)
Reduction in provisions 107,088
Closing balance (96,308)
19,817
Other provisions are recognised when DEDJTR has a present obligation, the future sacrifice of economic
benefits is probable and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to wholly settle
the present obligation at the end of the reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cashflows estimated to wholly settle
the present obligation, its carrying amount is the present value of those cashflows, using a discount rate that
reflects the time value of money and risks specific to the provision.
When some or all of the economic benefits required to wholly settle a provision are expected to be received
from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be
received and the amount of the receivable can be measured reliably.
DEDJTR Annual Report 2017-18 121
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7. HOW WE FINANCED OUR OPERATIONS
Introduction Structure
This section provides information on the sources 7.1 Borrowings
of finance utilised by the Department during its 7.1.1 Maturity analysis of borrowings
operations, along with interest expenses (the 7.1.2 Interest expense
cost of borrowings) and other information related
to financing activities of DEDJTR. 7.2 Leases
7.2.1 Finance lease liabilities
This section includes disclosures of balances that 7.2.2 Operating lease liabilities
are financial instruments (such as borrowings and
cash balances). Notes 8.1 and 8.3 provide additional, 7.3 Cash flow information and balances
specific financial instrument disclosures. 7.3.1 Cash and cash equivalents
7.3.2 Reconciliation of net result for the period
to cash flow from operating activities
7.4 Trust account balances
7.4.1 Trust account balances relating to trust
accounts controlled by the Department
7.4.2 Trust account balances relating
to trust accounts administered by
the Department
7.4.3 Trust accounts opened and closed by
the Department
7.5 Commitments for expenditure
7.5.1 Total commitments payable
7.5.2 Public Private Partnership commitments
7.5.3 Administered Public Private Partnership
(PPP) commitments
122 DEDJTR Annual Report 2017-18
7.1 Borrowings ($ thousand) 2017
2018
BORROWINGS 11,040
13,593 66,309
Current borrowings 439,651
Finance lease liabilities (i) 1,256
Advances from government (ii) 12,542 -
Advances from Commonwealth (iv)(v) 245,652
Advances from non public sector(iii) 711,438 78,605
Total current borrowings
Non-current borrowings 321,772 306,092
Finance lease liabilities (i) 279,809 229,162
Advances from Commonwealth (iv)(v) 601,581 535,254
Total non-current borrowings 1,313,019 613,859
Total borrowings
(i) Secured by the leased assets.
(ii) Advances from government are unsecured loans which bear no interest. The terms of the loans are generally agreed by the Minister
at the time the advance is provided.
(iii) State Works Loan Agreement with Transurban for the West Gate Tunnel Project.
(iv) Effective from 30 June 2016, the Rural Assistance Commissioner replaced the former Rural Finance Corporation Victoria. Through
an agreement with the Government, rural assistance schemes such as grants and loans are delivered by Bendigo and Adelaide Bank
under the name Rural Finance. Rural Finance delivers rural assistance schemes, such as drought and dairy concessional loans, on behalf
of the Government.
(v) Advances from Commonwealth relate to Federal Government's concessional loan scheme with the Department of Agriculture and Water
Resources.
Borrowings refer to interest bearing liabilities mainly raised from public borrowings raised through the
Treasury Corporation of Victoria, finance leases and other interest bearing arrangements.
Borrowings are classified as financial instruments. All interest bearing liabilities are initially recognised
at the fair value of the consideration received, less directly attributable transaction costs. The measurement
basis subsequent to initial recognition depends on whether DEDJTR has categorised its interest bearing
liabilities as either financial liabilities designated at fair value through profit or loss, or financial liabilities
at amortised cost. The classification depends on the nature and purpose of the interest bearing liabilities.
DEDJTR determines the classification of its interest bearing liabilities at initial recognition.
During the current and prior year, there were no defaults and breaches of loans.
DEDJTR Annual Report 2017-18 123
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7.1.1 Maturity analysis of borrowings (i)
MATURITY ANALYSIS OF BORROWINGS
($ thousand)
Maturity dates
Carrying Nominal Less than 1-3 3 - 12 1-5 Over
amount amount 1 Month Months Months years 5 years
2018 335,365 710,859 5,954 7,448 28,484 149,217 519,756
439,651 430,170 82,030 - 330,936 16,285 919
Finance lease liabilities 292,351 292,442 53,922
245,652 245,652 - - 12,633 225,887
Advances from 1,313,019 1,679,123 - - -
government 87,984 - 245,652 219,424
317,132 746,562
Advances from 66,309 7,448 617,705 131,045
Commonwealth 230,418 17,205 498,247
613,859 667,164 3,138 6,276 28,458 64,822 919
Advances from non 66,309 31,517 5,958 10,710
public sector 213,072 165,596
230,418 - - - 664,762
Total
963,891 34,655 12,234 39,168
2017
Finance lease liabilities
Advances from
government
Advances from
Commonwealth
Total
(i) Maturity analysis is presented using the contractual and discounted cash flow.
7.1.2 Interest expense TOTAL INTEREST EXPENSE 2017
(27,381)
Interest on finance leases ($ thousand) (27,381)
Total interest expense 2018
(34,727)
(34,727)
Interest expense includes costs incurred in connection with borrowings. It includes interest on components
of finance lease repayments, and amortisation of discounts or premiums in relation to borrowings.
Interest expense is recognised as an expense in the period in which it is incurred.
124 DEDJTR Annual Report 2017-18
7.2 Leases
7.2.1 Finance lease liabilities (DEDJTR as lessee)
Finance leases entered into by DEDJTR include Royal Melbourne Showgrounds, Biosciences Research Centre,
Melbourne Exhibition and Convention Centre and motor vehicles.
COMMISSIONED PPPS RELATED FINANCE LEASE LIABILITIES PAYABLE
($ thousand)
Minimum future lease payments(i) Present value of minimum
future lease payments
2018 2017 2018 2017
Royal Melbourne Showgrounds
Not longer than one year 5,730 5,730 1,637 1,484
Longer than one year but no later than five 22,921 22,921 8,422 7,634
years
Longer than five years 46,623 52,353 31,704 34,129
Biosciences Research Centre(i)
Not longer than one year 24,277 23,609 2,776 996
Longer than one year but no later than five 103,331 100,492 19,073 11,739
years
Longer than five years 420,658 445,894 228,475 245,312
Melbourne Exhibition and Convention Centre
Not longer than one year 3,784 - 1,385 -
Longer than one year but no later than five 16,238 - 6,533 -
years
Longer than five years 52,475 - 21,031 -
Total 696,036 650,999 321,035 301,294
(i) Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual, including 100 per cent
of the joint operation (AgriBio Project) finance lease liability, as La Trobe University extinguished its financial obligation during 2015-16.
A lease is a right to use an asset for an agreed period of time in exchange for payment.
Leases are classified at their inception as either operating or finance leases based on the economic
substance of the agreement so as to reflect the risks and rewards incidental to ownership. Leases
of infrastructure, property, plant and equipment are classified as finance infrastructure leases whenever
the≈terms of the lease transfer substantially all the risks and rewards of ownership from the lessor to the
lessee. For service concession arrangements, the commencement of the lease term is deemed to be the date
the asset is commissioned. All other leases are classified as operating leases.
DEDJTR Annual Report 2017-18 125
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FINANCIAL PERFORMANCE
Finance leases - DEDJTR as lessee 7.2.1 Finance lease liabilities
(DEDJTR as lessee)
At the commencement of the lease term, finance
leases are initially recognised as assets and Commissioned public private partnerships (PPPs)
liabilities at amounts equal to the fair value of
the lease property or, if lower, the present value Royal Melbourne Showgrounds
of the minimum lease payment, each determined
at the inception of the lease. The lease asset is The State, has entered into a joint operation
accounted for as a non-financial physical asset. agreement with the Royal Agricultural Society
If there is certainty that DEDJTR will obtain of Victoria Limited (RASV) to redevelop the Royal
ownership of the lease asset by the end of the lease Melbourne Showgrounds. The agreement came
term, the asset shall be depreciated over the useful into effect on 30 June 2005. Two joint operation
life of the asset. If there is no reasonable certainty structures were established, an unincorporated joint
that DEDJTR, as lessee, will obtain ownership operation to carry out and deliver the joint operation
by the end of the lease term, the asset shall be project, and an incorporated joint operation entity,
fully depreciated over the shorter of the lease term Showgrounds Nominees Pty Ltd to hold the assets
and its useful life. of the joint operation and to enter into agreements
on behalf of the State and RASV.
Minimum finance lease payments are apportioned
between reduction of the outstanding lease In June 2006, Showgrounds Nominees Pty Ltd
liability and periodic finance expense which is entered into a Development and Operations
calculated using the interest rate implicit in the Agreement (on behalf of the State and RASV)
lease and charged directly to the comprehensive with the Concessionaire, PPP Solutions
operating statement. Contingent rentals associated (Showgrounds) Nominee Pty Ltd to design,
with finance leases are recognised as an expense construct, finance and maintain the new facilities
in the period in which they are incurred. at the showgrounds. The project operation term
is 25 years from the date of commercial acceptance
of completed works, which occurred in August
2006. The showgrounds buildings will revert
to the joint operation on the conclusion of the
lease arrangement.
The payments that relate to the redevelopment of
the showgrounds are accounted for as a finance
lease as disclosed in the table above. In addition,
the Department also pays operating and
maintenance costs.
Biosciences Research Centre
In April 2008, the state, represented by the former
Department of Primary Industries entered into a
joint operation agreement with La Trobe University
(La Trobe) to establish a world-class research facility
known as AgriBio, Centre for AgriBioscience.
On 30 April 2009, Biosciences Research Centre
Pty Ltd entered into a Project Agreement (on behalf
of the state and La Trobe) with Plenary Research
Pty Ltd (the Concessionaire) to design, construct,
finance and maintain a facility over the project’s
operating term. The project’s operating term is
25 years from the date of commercial acceptance,
which occurred on 18 July 2012.
126 DEDJTR Annual Report 2017-18
The service fee payments that relate to the project facility are accounted for as a finance lease as disclosed
in the table above. In addition, the department also pays operating and maintenance costs.
Melbourne Exhibition and Convention Centre (Expansion Stage)
The Melbourne Convention and Exhibition Centre Expansion Project (Stage 2) was announced in the
2015‑16 Budget. The project is being delivered as a modification under the existing Melbourne Convention
Centre Development (MCCD) Project. The project will extend the existing MCEC facilities, adding nearly
20,000 square metres of flexible, multi-purpose event space, including meeting rooms, a new banquet hall
and 9,000 square metres of new exhibition space, and a central hub linking to the existing MCEC facilities.
On 28 May 2016, the State entered into a Project Agreement with MECE Project Pty Ltd (the Concessionaire)
for the design, construction, partial financing and maintenance of the MCEC Expansion over the project’s
operating term to 2034. The project operation term is 16 years for partial build cost. The MCEC Expansion
was officially opened on 8 July 2018, with Commercial Acceptance achieved on 13 July 2018.
TOTAL INTEREST BEARING LIABILITIES
($ thousand)
Minimum future lease Present value of minimum
payments(i) future lease payments
2018 2017 2018 2017
Finance lease liabilities payable (including PPPs)
Not longer than one year 41,727 37,872 13,299 10,826
Longer than one year and not longer than five years 149,376 131,045 40,563 26,651
Longer than five years 519,756 498,247 281,209 279,441
Minimum lease payments(i) 710,858 667,164 335,071 316,918
Less future finance charges (375,494) (350,246) - -
Present value of minimum lease payments 335,365 316,918 335,071 316,918
Included in the financial statements as: - - 13,593 10,826
Current borrowings
Non-current borrowings - - 321,772 306,092
Total interest bearing liabilities
- - 335,365 316,918
(i) Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual, including 100 per cent of the
joint operation (AgriBio Project) finance lease liability, as La Trobe University extinguished its financial obligation during 2015-16.
DEDJTR Annual Report 2017-18 127
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FINANCIAL PERFORMANCE
7.2.2 Operating lease liabilities
Leasing arrangements
Operating leases mainly relate to accommodation with lease terms of between 2 and 20 years. All operating
lease contracts contain market review clauses in the event the department exercises its option to renew.
The department does not have an option to purchase the leased assets at the expiry of the lease period.
($ thousand) 2017
2018
Non-cancellable operating leases 43,544 40,167
Not longer than one year 94,075 111,374
Longer than one year but not longer than five years 11,346 17,467
Longer than five years 148,965 169,008
Non-cancellable operating leases (inclusive of GST) (13,542) (15,364)
less GST recoverable from the ATO (i) 135,422 153,644
Non-cancellable operating leases (exclusive of GST)
(i) GST is not applicable to leases relating to overseas offices, which are included in this note.
128 DEDJTR Annual Report 2017-18
7.3 Cash flow information and balances
Cash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits
at call and those highly liquid investments with an original maturity of three months or less, which are
held for the purpose of meeting short term cash commitments rather than for investment purposes, and
are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
For the purpose of the cash flow statement, cash includes cash-on-hand and in bank (including funds
held in trust), net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the
cash flow statement is reconciled to the related items in the balance sheet as follows:
7.3.1 Cash and cash equivalents ($ thousand) 2017
2018 78,788
Cash and short term deposits 1,730,142
Funds held in trust 73,290 1,808,930
Balance as per cash flow statement 1,279,380
1,352,670
Due to the State of Victoria's investment policy and The above funding arrangements often result in the
government funding arrangements, the Department department having a notional shortfall in the cash
does not hold a large cash reserve in its bank at bank required for payment of unpresented
accounts. Cash received by the Department from cheques at the reporting period.
the generation of income is generally paid into
the State's bank account, known as the Public At 30 June 2018, cash at bank included
Account. Similarly, any departmental expenditure, the amount of a notional shortfall for the
including those in the form of cheques drawn by the payment of unpresented cheques of $25,478,153
department for the payment of goods and services (2017: $486,280.)
to its suppliers and creditors are made via the
Public Account. The process is such that, the Public
Account would remit to the Department the cash
required for the amount drawn on the cheques. This
remittance by the Public Account occurs upon the
presentation of the cheques by the department's
suppliers or creditors.
DEDJTR Annual Report 2017-18 129
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FINANCIAL PERFORMANCE
7.3.2 Reconciliation of net result for the period ($ thousand) 2017
to cash flow from operating activities 2018 (496,939)
Net result for the period (565,250)
Non-cash movements
Loss on sale of disposal of non-current assets 32,253 18,804
Depreciation and amortisation of non-financial assets and intangible assets 43,183 46,177
Derecognition of property, plant and equipment 3,870 15,595
Resources provided free of charge or for nominal consideration
Resources received free of charge or for nominal consideration - 1,301
Revaluation of biological assets (98) (523)
Revaluation of financial instruments (434) (1,405)
Revaluation of forward FX contract
Gain/(impairment) of loans and receivables 2 (2)
Revaluation of long service leave liability 464 (228)
Unwinding of other provision 28,638
Movements in assets and liabilities (150) 191
(Increase)/decrease in receivables (12,117) (2,168)
(Increase)/decrease in inventories (3,361)
(Increase)/decrease in prepayments
Increase/(decrease) in payables (284,725) 249,625
Increase/(decrease) in provisions 102 (69)
Net cash flows from/(used) in operating activities
(49,618) (8,565)
94,378 494,124
5,176
14,413
(704,326) 326,970
130 DEDJTR Annual Report 2017-18
DEDJTR Annual Report 2017-18 131
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FINANCIAL PERFORMANCE
7.4 Trust account balances
The Department has responsibility for transactions and balances relating to trust funds held on behalf
of third parties external to the Department. Funds managed on behalf of third parties are not recognised
in these financial statements as they are managed on a fiduciary and custodial basis, and therefore
are not controlled by the Department.
7.4.1 T rust account balances relating to trust accounts
controlled by the Department
The following list of controlled trust account balances on a cash basis:
CONTROLLED TRUSTS
State trusts
Better Roads Victoria Trust Account
Established under the Business Franchise (Petroleum Products) Act 1979 to provide funding for road
improvements across Victoria.
Regional Jobs and Infrastructure Fund
Established under the Regional Growth Fund Act 2011 to support regional cities and country communities
in infrastructure, facilities, services, job creation, career opportunities and to increase investment.
State Development Special Projects Trust Account
Established under section 19 of the Financial Management Act 1994, to assist in facilitating, encouraging,
promoting and carrying out activities leading to a balanced economic development of the State of Victoria.
Victorian Transport Fund
Established under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act
2016 into which the proceeds of Port of Melbourne lease transaction are paid; and from which amounts
authorised by the Treasurer to fund the cost of all or any part of the development of the Level Crossing
Removal Program; and infrastructure projects for or in relation to public transport, roads, rail, the movement
of freight, ports or other infrastructure (including regional infrastructure) are paid.
Agriculture Projects Trust Account
Established under section 19 of the Financial Management Act 1994, to assist in facilitating, encouraging,
promoting and carrying out activities leading to a balanced economic development of the State of Victoria.
Disease Compensation Funds
Established under section 5 of the Livestock Disease Control Act 1994 to support the control and eradication
of any outbreak and to provide compensation for livestock destroyed due to suffering or suspected
of suffering from diseases.
Recreational Fishing Licences Trust Account
Operates under section 151B of the Fisheries Act 1995 to disburse revenue derived from the sale
of recreational fishing licenses to projects that will further improve recreational fishing opportunities
in Victoria, and to fund costs incurred in the administration of recreational fishing licences and the account.
132 DEDJTR Annual Report 2017-18
($ thousand)
2016 Total Receipts Total Payments 2017 Total Receipts Total Payments 2018
716,522
1,022,316 380,477 (302,205) 1,100,588 517,389 (901,455)
264,784 139,049 (142,552) 261,281 132,978 (166,602) 227,657
89,461 150,609 (136,322) 103,748 127,387 (102,070) 129,065
- 2,076,651 (1,962,570) 114,081 3,125,360 (3,195,067) 44,374
47,320 6,052 (24,657) 28,715 22,501 (21,321) 29,895
23,029 25,233 12,128 (8,749) 28,612
6,290 (4,086)
5,355 8,497 (6,945) 6,907 7,234 (8,621) 5,520
DEDJTR Annual Report 2017-18 133
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FINANCIAL PERFORMANCE
Plant, Equipment and Machinery Trust Accounts
Operate under section 23 of the Conservation, Forests and Lands Act 1987 and section 141 of the Fisheries
Act 1995 to enable the purchase of plant, equipment or machinery required for the purposes of the Acts,
and for the operation, maintenance and repair of that plant, equipment or machinery, and to enable
the payment of any other expenses in relation thereto.
State Treasury Trust Fund
Established under the Financial Management Act 1994 to record the receipt and disbursement of unclaimed
monies and other funds held in trust.
Inter-departmental transfer fund
The trust was established under section 19 of the Financial Management Act 1994 by the Minister for Finance
to record inter-departmental transfers when no other trust arrangement exists.
Animals in Research and Teaching Welfare Fund
Established under the Prevention of Cruelty to Animals Act 1986 to record the receipt and disbursement
of funds collected for monitoring and reporting on compliance by animal research and teaching
establishments.
VicFleet Vehicle Lease Trust Account
Established under section 19(2) of the Financial Management Act 1994 as a specific purpose operating
account. It receives funding and makes payments in relation to the government motor vehicle pool.
Arts Fund
Established under the Arts Victoria Act 1972 to provide funds to develop and improve knowledge,
understanding, appreciation and practice of the arts in Victoria.
Commonwealth Treasury Trust Fund
Established under section 19 of the Financial Management Act 1994, for the purpose of holding funds
from the Commonwealth Government.
Total controlled trusts
134 DEDJTR Annual Report 2017-18
($ thousand)
2016 Total Receipts Total Payments 2017 Total Receipts Total Payments 2018
3,433
9,188 753 (6,509) 3,432 24 (23)
3,813 1,617 (3,610) 1,820 3,531 (2,259) 3,092
- - - - 1,937
- - - - 78,602 (76,665)
34
45 (11)
2,666 998 (3,038) 626 817 (1,443) -
4,246 9,130 (13,376) - - - -
67,355 20,181 (3,825) 83,711 25,688 (20,160) 89,239
1,539,533 2,800,304 (2,609,695) 1,730,142 4,053,684 (4,504,446) 1,279,380
DEDJTR Annual Report 2017-18 135
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FINANCIAL PERFORMANCE
7.4.2 T rust account balances relating to trust accounts
administered by the Department
The Department has responsibility for transactions and balances relating to trust funds held on behalf
of third parties external to the Department. Funds managed on behalf of third parties are not recognised
in these financial statements as they are managed on a fiduciary and custodial basis, and therefore
are not controlled by the Department.
The following list of administered trust account balances on a cash basis:
ADMINISTERED TRUSTS
STATE TRUSTS
Lysterfield Reclamation Levy Trust Fund
Established under section 7 of the Extractive Industries (Lysterfield) Act 1986 for the purposes of applying monies received
in the trust to the reclamation of certain lands in accordance with the Act.
State Treasury Trust Fund
Established under the Financial Management Act 1994 to record the receipt and disbursement of unclaimed monies
and other funds held in trust.
ANZAC Day Proceeds Trust Fund
Established under the ANZAC Day Act 1958 to receive funds as required to be paid by the Anzac Day Act 1958
and the Racing Act 1958 and to be credited to the Victorian Veterans Fund.
Public Service Commuters Club
Established under the Financial Management Act 1994 to record the receipt of amounts associated with the scheme
and deductions from club members salaries as well as recording payment to the Public Transport Corporation.
Total administered trusts
136 DEDJTR Annual Report 2017-18
($ thousand)
2016 Total Receipts Total Payments 2017 Total Receipts Total Payments 2018
5,328
4,178 428 - 4,606 723 (1)
786
2,535 105 (1,205) 1,435 1 (650) -
120 - (120) - - - (771)
5,343
(477) - (238) (715) - (56)
6,356 533 (1,563) 5,326 724 (707)
DEDJTR Annual Report 2017-18 137
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FINANCIAL PERFORMANCE
7.4.3 Tr ust accounts opened and closed by the Department
During the 2018 financial year, one new trust account was opened by the Department : Animals in Research
and Teaching Welfare Fund
The Arts Fund was used as a trust to hold funds on behalf of Victorian Government arts agencies.
This function is no longer required under modernised funding arrangements.
In addition, activities in relation to the 'ANZAC Day Proceeds Trust Fund' are now with the Department
of Health and Human Services.
138 DEDJTR Annual Report 2017-18
7.5 Commitments for expenditure
Commitments for future expenditure include operating and capital commitments arising from contracts.
These commitments are recorded below at their nominal value and inclusive of GST. Where it is considered
appropriate and provides additional relevant information to users, the net present values of significant
individual projects are stated. These future expenditures cease to be disclosed as commitments once
the related liabilities are recognised in the balance sheet.
7.5.1 Net commitments payable ($ thousand)
NOMINAL AMOUNTS: 2018 Less than 1 Between 1 and
Public private partnership commitments year 5 years Over 5 years Total
Capital expenditure commitments 18,399,047
Other operating commitments 146,400 4,481,681 13,770,966
Grant commitments 3,821,254
Total commitment (inclusive of GST) 1,816,853 1,763,239 241,162 200,613
Less GST recoverable 628,662
Total commitment (exclusive of GST) 136,266 58,106 6,241
NOMINAL AMOUNTS: 2017 23,049,575
320,934 293,413 14,314 (2,095,416)
Public private partnership commitments 20,954,159
Capital expenditure commitments 2,420,453 6,596,439 14,032,683
Other operating commitments
Grant commitments ($ thousand)
Total commitment (inclusive of GST)
Less GST recoverable Less than 1 Between 1 Over 5 Total
Total commitment (exclusive of GST) year and 5 years years 6,426,137
2,920,852
8,345 229,532 6,188,260
100,338
2,349,364 568,513 2,975 739,252
10,186,579
43,026 33,393 23,919 (926,053)
9,260,526
334,998 389,450 14,804
2,735,733 1,220,888 6,229,958
DEDJTR Annual Report 2017-18 139
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FINANCIAL PERFORMANCE
7.5.2 Controlled Public Private Partnership (PPP) commitments
DEDJTR may enters into arrangements with private costs, which are expensed in the comprehensive
sector participants to design and construct or operating statement as they are incurred. The
upgrade assets used to provide public services. other, less common, form of SCA is one in which
These arrangements usually include the provision DEDJTR grants to an operator, for a specified
of design and construct, operational and period of time, the right to collect fees from users
maintenance services for a specified period of time. of the SCA asset, in return for which the operator
These arrangements are often referred to as either constructs the asset and has the obligation to
PPPs or service concession arrangements (SCAs). supply agreed upon services, including maintenance
of the asset for the period of the concession. These
SCAs usually take one of two main forms. In private sector entities typically lease land, and
the more common form, DEDJTR pays the sometimes state works, from DEDJTR and construct
operator over the arrangement period, subject to infrastructure. At the end of the concession
specified performance criteria being met. At the period, the land and state works, together with the
date of commitment to the principal provisions constructed facilities, will be returned to DEDJTR.
of the arrangement, these estimated periodic
payments are allocated between a component There is currently no authoritative accounting
related to the design and construction or guidance applicable to grantors (the Department)
upgrading of the asset and components related on the recognition and measurement of the right
to the ongoing operation and maintenance of the of the State to receive assets from such concession
asset. The former component is accounted for as arrangements. Due to the lack of such guidance,
a lease payment in accordance with the leases there has been no change to existing policy and
accounting policy. The remaining components those assets are not currently recognised.
are accounted for as commitments for operating
Notes for table opposite
(i) Other commitments relate to operating maintenance and life cycle costs.
(ii) The figures represent 100 per cent of the total commitment under the terms of the PPP with the concessionaire offset by a 50 per cent
of the QSP cost recoupment under the terms of the joint arrangement with Royal Melbourne Showgrounds.
(iii) The figures represent 100 per cent of the operating commitment under the terms of the PPP with the concessionaire, offset
by a 25 per cent of the general operating costs recoupment from La Trobe University under the terms of the joint arrangement. In 2016,
La Trobe University has prepaid the net present value of its commitment to fund 25 per cent of the BRC operating costs resulting in DEDJTR
recognising a liability for this prepayment that will be offset against the BRC operating costs over the remaining contract term.
(iv) Other operating commitments for the AgriBio Project exclude pass through costs related to utilities, waste management and insurance
on the basis that they are variable in nature and cannot be reliably estimated.
(v) High Capacity Metro Trains are being delivered to the State over a period of four years. The commitments for uncommissioned PPPs
include the discounted value of the portion of the minimum lease payments that relate to train sets that have not been provisionally
accepted and therefore are not presented on the balance sheet.
(vi) The total commitments will not equal the sum of the minimum lease payments and other commitments because they are discounted,
whereas total commitments are at nominal value. For uncommissioned projects, the discounted values of the ‘minimum lease payment’
commitments are derived by proxy, being the nominal sum of the total capital costs and any other allowable capitalised expenses,
including capitalised interest, during the development and construction phase of a project as reflected in the contracted financial model.
This nominal sum is deemed as the fair value of the leased asset for the purpose of AASB 117 Leases and will equate to the discounted values
of the ‘minimum lease payment’ commitments.
(vii) The minimum lease payments of uncommissioned PPPs include the government capital contributions. If the government
capital contributions are made upfront, the amount represents the nominal value of the payments that will be made when the project
is commissioned.
(viii) The figures represent 100 per cent of commitment payable under the terms of the PPP with the concessionaire for the expansion stage
of the Melbourne Centre and Exhibition Project which commenced in April 2018, offset by a 100% recoupment of the QSP cost under the
terms of the memorandum of understanding with Melbourne Convention and Exhibition Trust.
140 DEDJTR Annual Report 2017-18
($ thousand)
2018 2017
Minimum Other Commitments Minimum Other Commitments
lease Commitments(i) lease Commitments (i)
payments payments
Discounted Discounted
Value
Present Value Nominal Value Value Present Value Nominal Value
Commissioned PPPs
Royal Melbourne - 19,554 36,740 - 19,860 39,007
Showgrounds (ii)
Biosciences Research - 126,257 281,819 - 123,347 289,750
Centre (iii) (iv)
Melbourne Convention - 47,826 76,595 - --
and Exhibition Centre
Expansion Project(viii)
Sub-total - 193,637 395,154 - 143,207 328,757
Uncommissioned PPPs (vi) (vii)
High Capacity Metro 1,860,890 932,098 6,135,445 1,860,890 932,098 6,135,445
Trains (v)
West Gate Tunnel Project - 1,292,114 1,524,663 - --
Melbourne Metro Tunnel 6,609,728 510,167 10,456,592 - --
and Station
Sub-total 8,470,618 2,734,380 18,116,700 1,860,890 932,098 6,135,445
Total commitments for 8,470,618 2,928,017 18,511,854 1,860,890 1,075,305 6,464,202
PPPs
Commissioned PPP Commitments receivable
Royal Melbourne - (9,777) (18,370) - (9,930) (19,504)
Showgrounds (ii) (17,843) - (8,298) (18,562)
(76,595) -
Biosciences Research - (8,302) - -
Centre (iii) (iv)
Melbourne Convention - (47,826)
and Exhibition Centre
Expansion Project(viii)
less GST recoverable from (770,056) (260,192) (1,672,641) (169,172) (96,098) (584,194)
the ATO 16,726,406 1,691,718 960,979 5,841,942
Total commitments for 7,700,562 2,601,920
PPP (exclusive of GST)
DEDJTR Annual Report 2017-18 141
02
FINANCIAL PERFORMANCE
7.5.3 Administered Public Private Partnership (PPP) commitments
MELBOURNE CONVENTION CENTRE DEVELOPMENT PROJECT FINANCE LEASE COMMITMENT
($ thousand)
Minimum future Present value of future
lease payments lease payments
2018 2017 2018 2017
Commissioned PPP related finance lease commitments 47,140 45,662 44,556 43,159
Not longer than one year 201,067 194,751 151,988 147,224
Longer than one year but not longer than five years 637,072 702,126 253,795 265,462
Longer than five years 885,279 942,540 450,339 455,845
Minimum future lease payments (434,940) (486,694)
Less future finance charges 450,339 455,845 - -
Present value of minimum lease payments 450,339 455,845
Uncommissioned PPP related finance lease commitments
Not longer than one year ----
Longer than one year but not longer than five years - 15,673 - 12,263
Longer than five years - 58,285 - 24,723
Minimum future lease payments - 73,958 - 36,986
Less future finance charges - (36,972) - -
Present value of minimum lease payments - 36,986 - 36,986
(i) Prior year uncommissioned PPP related to Melbourne Convention Centre Development Project (Expansion Stage). This project is now
commissioned and is stated as a finance lease liability in the departments financial statements. Refer Note 7.2.1.
142 DEDJTR Annual Report 2017-18
MELBOURNE CONVENTION CENTRE DEVELOPMENT PROJECT OPERATING LEASE COMMITMENT
($ thousand)
Minimum future Present value of future
lease payments lease payments
2018 2017 2018 2017
Commissioned PPP related operating lease commitments
Not longer than one year 20,438 19,843 19,462 18,895
Longer than one year but not longer than five years 86,736 84,224 68,012 66,046
Longer than five years 270,233 298,218 121,301 127,841
Minimum future lease payments 377,407 402,284 208,775 212,782
Less future finance charges (168,632) (189,502) - -
Present value of minimum lease payments 208,775 212,782 208,775 212,782
In May 2006, the State of Victoria entered into an agreement under its Partnerships Victoria policy for
the development and maintenance of the Melbourne Convention Centre (MCC) facility by a private sector
consortium (the lessor).
The lessor was responsible for construction of the new facility convention centre (Stage 1), which
commenced in June 2006 and commercial acceptance was achieved on 31 March 2009. Upon its completion,
the Department on behalf of the State of Victoria was granted a 25 year finance lease by the lessor,
and entered into an agreement under which the new facility will be operated by the Melbourne Convention
and Exhibition Trust (MCET).
It is estimated as at 30 June 2018 that future lease payments relating to the facility constructed in 2009
amount to $450.3 million (2017: $492.8 million) in net present value terms, or $885.3 million (2017: $1,061 million)
in nominal dollars, to be paid to the lessor over a 25 year period which commenced 1 January 2009 over the
respective lease period till 2034. At the initial construction of the convention centre in 2009, the department
on behalf of the State of Victoria has entered into a loan agreement with MCET under which MCET
undertakes to repay the State of Victoria 50 per cent ($227.5 million) of the value of the asset ($455 million)
over a 25 year period.
As part of the 25 year lease arrangement, the lessor will provide services, maintenance, and refurbishments
in return for a fixed (inflation adjusted) quarterly service payment from the State of Victoria for the existing
facility. It is estimated that as at 30 June 2018, these future service payments amount to $208.7 million
(2017: $212.8 million) in net present value terms, or $377.4 million (2017: $492.8 million) in nominal dollars,
over the 25 year lease term.
Ownership of the MCC facility will transfer to the State of Victoria at the end of the 25 year lease period
at no cost.
DEDJTR Annual Report 2017-18 143
02
FINANCIAL PERFORMANCE
8. R ISKS, CONTINGENCIES AND
VALUATION JUDGEMENTS
Introduction 8.1 Financial instruments specific
disclosures
DEDJTR is exposed to risk from its activities and
outside factors. In addition, it is often necessary Introduction
to make judgements and estimates associated
with recognition and measurement of items in Financial instruments arise out of contractual
the financial statements. This section sets out agreements that give rise to a financial asset
financial instrument specific information, (including of one entity and a financial liability or equity
exposures to financial risks) as well as those items instrument of another entity. Due to the nature of
that are contingent in nature or require a higher the DEDJTR’s activities, certain financial assets and
level of judgement to be applied, which for DEDJTR financial liabilities arise under statute rather than
related mainly to fair value determination. a contract (for example taxes, fines and penalties).
Such assets and liabilities do not meet the definition
Structure of financial instruments in AASB 132 Financial
Instruments: Presentation.
8.1 Financial instruments specific disclosures
Categories of non-derivative financial
8.1.1 Categorisation instruments
8.1.2 Net holding gain/(loss) on financial Loans and receivables and cash are financial
instruments by category instrument assets with fixed and determinable
payments that are not quoted on an active
8.1.3 Financial risk management objectives market. These assets and liabilities are initially
and policies recognised at fair value plus any directly
attributable transaction costs. Subsequent to initial
8.2 Contingent assets and contingent liabilities measurement, loans and receivables are measured
at amortised cost using the effective interest
8.3 Fair value determination method (and for assets, less any impairment).
DEDJTR recognises the following assets in
8.3.1 Fair value determination of financial this category:
assets and liabilities
• cash and deposits
8.3.2 Non-financial physical assets
• receivables (excluding statutory receivables); and
• term deposits
Available-for-sale financial instrument assets
are those designated as available-for-sale or
not classified in any other category of financial
instrument asset. Such assets are initially recognised
at fair value. Subsequent to initial recognition, they
are measured at fair value with gains and losses
arising from changes in fair value, recognised in
‘Other economic flows – other comprehensive
income’ until the investment is disposed. Movements
resulting from impairment and foreign currency
changes are recognised in the net result as other
144 DEDJTR Annual Report 2017-18
economic flows. On disposal, the cumulative gain Derivative financial instruments are classified
or loss previously recognised in ‘Other economic as held for trading financial assets and liabilities.
flows – other comprehensive income’ is transferred They are initially recognised at fair value on the date
to other economic flows in the net result. DEDJTR on which a derivative contract is entered into.
recognises investments in equities and managed Derivatives are carried as assets when their fair
investment schemes in this category. value is positive and as liabilities when their fair
value is negative. Any gains or losses arising from
Financial assets and liabilities at fair value through changes in the fair value of derivatives after initial
profit and loss Financial assets are categorised as recognition are recognised in the consolidated
fair value through profit or loss at trade date if they comprehensive operating statement as an ‘other
are classified as held for trading or designated as economic flow’ included in the net result
such upon initial recognition. Financial instrument
assets are designated at fair value through profit Derecognition of financial assets
or loss on the basis that the financial assets
form part of a group of financial assets that are A financial asset (or, where applicable, a part
managed by the entity concerned based on their of a financial asset or part of a group of similar
fair values, and have their performance evaluated financial assets) is derecognised when:
in accordance with documented risk management
and investment strategies. • the rights to receive cash flows from the asset
have expired; or
Financial instruments at fair value through profit
or loss are initially measured at fair value and • DEDJTR retains the right to receive cash
attributable transaction costs are expensed as flows from the asset, but has assumed an
incurred. Subsequently, any changes in fair value obligation to pay them in full without material
are recognised in the net result as other economic delay to a third party under a ‘pass through’
flows. Any interest on a financial asset is recognised arrangement; or
in the net result from transactions.
• DEDJTR has transferred its rights to receive cash
Financial assets and liabilities at fair value through flows from the asset and either
profit or loss include the majority of DEDJTR’s equity
investments, debt securities, and borrowings. (a) h as transferred substantially all the risks and
rewards of the asset; or
Financial liabilities at amortised cost Financial
instrument liabilities are initially recognised (b) has neither transferred nor retained substantially
on the date they are originated. They are all the risks and rewards of the asset, but has
initially recognised at fair value plus any directly transferred control of the asset.
attributable transaction costs. Subsequent
to initial recognition, these financial instruments Where DEDJTR has neither transferred nor retained
are measured at amortised cost with any difference substantially all the risks and rewards or transferred
between the initial recognised amount and the control, the asset is recognised to the extent of
redemption value being recognised in profit and loss DEDJTR’s continuing involvement in the asset.
over the period of the interest-bearing liability, using
the weighted average interest rate method.
Financial instrument liabilities measured
at amortised cost include DEDJTR's leased
motor vehicles, contractual payables, deposits
held and advances received, and interest-bearing
arrangements other than those designated
at fair value through profit or loss.
DEDJTR Annual Report 2017-18 145
02
FINANCIAL PERFORMANCE
Impairment of financial assets Available-for-sale financial instrument assets
that meet the definition of loans and receivables
At the end of each reporting period, DEDJTR may be reclassified into the loans and receivables
assesses whether there is objective evidence category if there is the intention and ability to hold
that a financial asset or group of financial assets them for the foreseeable future or until maturity.
is impaired. All financial instrument assets, except
those measured at fair value through profit or loss, Derecognition of financial liabilities
are subject to annual review for impairment.
A financial liability is derecognised when the
Receivables are assessed for bad and doubtful obligation under the liability is discharged,
debts on a regular basis. Those bad debts cancelled or expires.
considered as written off by mutual consent are
classified as a transaction expense. Bad debts not When an existing financial liability is replaced
written off by mutual consent and the allowance by another from the same lender on substantially
for doubtful receivables are classified as 'other different terms, or the terms of an existing liability
economic flows' in the net result. are substantially modified, such an exchange or
modification is treated as a derecognition of the
The amount of the allowance is the difference original liability and the recognition of a new liability.
between the financial asset's carrying amount and The difference in the respective carrying amounts
the present value of estimated future cash flows, is recognised as an other economic flow in the
discounted at the effective interest rate. estimated consolidated comprehensive
operating statement.
In assessing impairment of statutory (non-
contractual) financial assets which are not
financial instruments, professional judgement
is applied in assessing materiality and using
estimates, averages and computational shortcuts
in accordance with AASB 136 Impairment of Assets.
Reclassification of financial instruments
Subsequent to initial recognition and under rare
circumstances, non‑derivative financial instruments
assets that have not been designated at fair
value through profit or loss upon recognition,
may be reclassified out of the fair value through
profit or loss category, if they are no longer held
for the purpose of selling or repurchasing in
the near term.
Financial instrument assets that meet the definition
of loans and receivables may be reclassified out
of the fair value through profit and loss category
into the loans and receivables category, where
they would have met the definition of loans
and receivables had they not been required to be
classified as fair value through profit and loss.
In these cases, the financial instrument assets
may be reclassified out of the fair value through
profit and loss category, if there is the intention
and ability to hold them for the foreseeable future
or until maturity.
146 DEDJTR Annual Report 2017-18
8.1.1 Financial instruments: Categorisation
($ thousand)
Contractual financial assets Contractual financial
– cash, loans and receivables liabilities at amortised cost Total
2018 1,352,670
329,891
Contractual financial assets 71
Cash and deposits 1,352,670 – 1,682,632
Receivables(i) 329,891 – 1,809,469
1,313,019
Investments 71 – 3,122,488
Total contractual financial assets 1,682,632 – 1,808,930
285,099
Contractual financial liabilities 73
Payables(i) 2,094,102
– Supplies and services – 1,809,469 1,715,483
316,918
Borrowings – 1,313,019
2,032,401
Total contractual financial liabilities – 3,122,488
2017
Contractual financial assets
Cash and deposits 1,808,930 –
Receivables(i) 285,099 –
Investments 73 –
Total contractual financial assets 2,094,102 –
Contractual financial liabilities
Payables(i)
– Supplies and services – 1,715,483
Borrowings – 316,918
Total contractual financial liabilities – 2,032,401
(i) Receivables and payables disclosed above exclude statutory receivables (i.e. GST recoverable) and statutory payables
(i.e. taxes payable).
DEDJTR Annual Report 2017-18 147
02
FINANCIAL PERFORMANCE
8.1.2 Financial instruments: Net holding gain/(loss) on financial instruments
by category
($ thousand)
Interest income/ Total
(expense)
2018
Contractual financial assets
Financial assets designated at amortised cost 5,752 5,752
Total contractual financial assets 5,752 5,752
Contractual financial liabilities
Financial liabilities at amortised cost (34,727) (34,727)
Total contractual financial liabilities (34,727) (34,727)
2017
Contractual financial assets
Financial assets designated at amortised cost 5,396 5,396
Total contractual financial assets 5,396 5,396
Contractual financial liabilities
Financial liabilities at amortised cost (27,381) (27,381)
Total contractual financial liabilities (27,381) (27,381)
The net holding gains or losses disclosed above are determined as follows:
• For cash and cash equivalents, loans or receivables, and available-for-sale financial assets, the net gain
or loss is calculated by taking the movement in the fair value of the asset, the interest income, plus or
minus foreign exchange gains or losses arising from revaluation of the financial assets, and minus any
impairment recognised in the net result.
• For financial liabilities measured at amortised cost, the net gain or loss is calculated by taking the interest
expense, and plus or minus foreign exchange gains or losses arising from the revaluation of financial
liabilities measured at amortised cost.
148 DEDJTR Annual Report 2017-18
8.1.3 Financial risk management Financial instruments: Credit risk
objectives and policies
Credit risk arises from the contractual financial
DEDJTR's activities expose it primarily to the assets of DEDJTR, which comprise cash and
financial risk of changes in interest rates. DEDJTR deposits, non-statutory receivables and
does not enter into derivative financial instruments available for-sale contractual financial assets.
to manage its exposure to interest rate. DEDJTR's exposure to credit risk arises from
the potential default of the counter party on their
DEDJTR does not enter into or trade financial contractual obligations resulting in financial loss
instruments, including derivative financial to DEDJTR. Credit risk is measured at fair value
instruments, for speculative purposes. and is monitored on a regular basis.
DEDJTR's principal financial instruments comprise: Credit risk associated with DEDJTR's financial assets
is minimal because its main debtor is the Victorian
• cash assets Government. For debtors other than government,
it is DEDJTR's policy to obtain sufficient collateral
• term deposits or credit enhancements where appropriate.
• receivables (excluding statutory receivables) DEDJTR mainly holds financial assets that are
on fixed interest except for cash assets which are
• payables (excluding statutory payables) mainly cash at bank. As with the policy for debtors,
DEDJTR's policy is to only deal with domestic banks
• borrowings, and with high credit ratings.
• finance lease liabilities payable. Provision for impairment for contractual financial
assets is recognised when there is objective
Details of the significant accounting policies evidence that DEDJTR will not be able to collect
and methods adopted, including the criteria for a receivable. Objective evidence includes financial
recognition, the basis of measurement, and the basis difficulties of the debtor, default payments, debts
on which income and expenses are recognised, with which are more than 60 days overdue, and changes
respect to each class of financial asset, financial in debtor credit ratings.
liability and equity instrument above are disclosed
in Note 8.3 – Fair value determination of financial Except as otherwise detailed in the following table,
assets and liabilities, to the financial statements. the carrying amount of financial assets recorded
in the financial statements, net of any allowances
The main purpose in holding financial instruments for losses, represents DEDJTR's maximum exposure
is to prudentially manage DEDJTR’s financial risks to credit risk without taking account of the value
within the government policy parameters. of any collateral obtained.
DEDJTR uses different methods to measure and There has been no material change to the
manage the different risks to which it is exposed. Department's credit risk in 2017–18.
The carrying amounts of DEDJTR's contractual
financial assets and financial liabilities by
category are disclosed in the Note 8.1.1 – Financial
instruments: Categorisation.
In December 2015, DEDJTR entered into
a foreign exchange contract to hedge exposures
to USD payments to a third party, for the hosting
of an international golf event in Melbourne to be
held in 2018.
DEDJTR Annual Report 2017-18 149
02
FINANCIAL PERFORMANCE
Credit quality of contractual financial assets that are neither past due nor impaired.
($ thousand)
Government Financial Internally Other Total
agencies institutions rated bank
(AAA credit (minimum deposits
rating) BBB credit
rating)
2018 1,349,986 26,491 2,684 – 1,352,670
Cash and deposits 63,265 – – 266,626 329,891
Receivables(i) – – – 71
Investments 71
Total contractual financial assets 1,413,252 26,491 2,684 266,697 1,682,632
2017
Cash and deposits 1,802,278 – 6,652 – 1,808,930
Receivables(i) 59,580
Investments – – – 225,519 285,099
Total contractual financial assets
1,861,858 – – 73 73
– 6,652 225,592 2,094,102
(i) The carrying amounts disclosed exclude statutory receivables (e.g. amounts owing from the State of Victoria and GST recoverable).
Contractual financial assets that are either past due or impaired
There are no material financial assets which are individually determined to be impaired. Currently DEDJTR
does not hold any collateral as security nor credit enhancements relating to any of its financial assets.
There are no financial assets that have had their terms renegotiated so as to prevent them from being past
due or impaired, and they are stated at the carrying amounts as indicated.
150 DEDJTR Annual Report 2017-18
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